3 ms·
Not necessarily. Increased demand solely from cash injections in an economy will increase prices without an increase in investments, since those investing can't
by ucaetano 9y ago
Not necessarily. Increased demand solely from cash injections in an economy will increase prices without an increase in investments, since those investing can't know if the cash injections will continue or not.
So it will lead to short-term inflation, and without the long-term investments in production, that inflation will continue for as long as the injections continue.
As the cash injections aren't universal, those who receive it will benefit, while the ones who don't will see their purchasing power drop significantly, and their lives worsen.
- shkkmo 9y agoI was specifically disputing the analogy with providing goods like shoes and good to impoverished communities.
- vilmosi 9y agoWell cash injection by definition create inflation. However it could be a neutral effect if, for instance, you get rid of unemployment benefits at the same time.
- ucaetano 9y agoIndeed, but the issue is that without predictability in the cash injections, nobody will be willing to invest in production.
- shkkmo 9y agoNo. Price increases, by definition, create inflation. Cash injections CAN lead to inflation as an effect, but this is not a tautology (i.e. by definition).